Indonesia will raise the excise tax on machine-made tobacco products by an average of 12.5% in 2021. Hand-made cigarettes will have no tax hike as the government seeks more revenues but doesn’t want to affect the hand-rolled industry which employs multitude of its citizens.
The country expects to rake in Rp. 174 trillion (US$12.3 billion) in tax revenues from tobacco in 2021. The tax hike goes into effect February 1, 2021.
“We are trying to balance the health aspect with the economic condition generally that is impacted by Covid-19, especially for workers and farmers,” the finance minister Sri Mulyani Indrawati told a virtual news conference.
Indonesia is the world’s second largest cigarette market after China. The increase was smaller than the 23% average excise tax hike for tobacco products this year.
Even with the tax hikes, cigarettes are relatively inexpensive in Indonesia. According to a WHO 2017 report, a 20-pack box of the most popular machine made brand costs around $5.00 compared to $12 in nearby Malaysia.